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Formality
Formality means the writing and signature requirement of a contract and the contract might be required to be
witnessed by others. The Islamic law of contract emphasizes on writing down the terms of a contract which is
to avoid a dispute between the parties as one or more parties may, after long period of time, forget what they
had actually decided or agreed upon.
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However, under the Islamic law of contract, an oral contract is valid if
it can be proven by reliable and capable witnesses. In a conventional law, an oral contract is also valid but the
conventional law encourages people to write down the terms of the contract in all contracts if possible.
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Nonetheless, some contracts should be in writing because of the nature of contract. Marriage contract, transfer
of real property, etc., must be in writing and signed by the parties involved. There are parliamentary laws in
many countries that stipulate to write down some contracts and the law provides that if the parties do not write
down the contract and duly sign it, the contract would be considered as invalid. As mentioned above, the
Quran requires people to write down a loan contract in Surah (Chapter) 2, Verse 282. This verse also requires
witnesses to testify the contract when any dispute arises out of this contract.
It is easier to prove a contract when the terms are in writing. A loan agreement also should be in writing so
that if the parties forget the amount of loan and other agreed terms, the written note will remind them of the
terms of loan agreement, loan amount, payment date etc. For this particular reason Allah SWT has asked the
parties in a loan agreement to write down the particulars as mentioned in Surah al-Baqarah which is also as
mentioned above .
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It is highly recommended that for the parties in a contract to write down the terms of the
contract
.
If any dispute arises out of the contract, they can refer to the written contract to solve the dispute. It
would be much better if the contract can also be signed by one or more witnesses so as to give weight to the
validity of the document.
The Islamic law of contract has not specified any formalities for making a contract. According to Ibn Qudama,
the Islamic law of contract does not fix any formality to make a contract. He observed, Allah has permitted
sale but did not specify the manner in which it is to be concluded
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. This view is also supported by Liaquat Ali
Khan Niazi who said: there is no fix formality in a contract under the Islamic law.
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Allah has mentioned in
the Qur’an to write down contracts and to have witnesses but does not provide specific format of writing
down the contract.
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O’Sullivan, J. and Hilliard, J. 2006. The Law of Contract, New York: Oxford University Press; Kool, Chin Nam.
1991. A comparative study of Islamic law and civil law in Malaysia on contract, arbitration, banking principles and
documentation
. Petaling Jaya, Kuala Lumpur: International Islamic University Malaysia.
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Zuhaily, Wahbah. 1997. Al-Fiqhul Islamiy Wa Adillatuhu, p. 122; Sanhuri, Abdul Razak Ahmad. 1990. Syarh Qanun
Al-Madaniy
.
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In Surah (Chapter) Baqara (2): Verse 282, Allah asks the lender and the borrower to write down the loan transaction.
The objective and benefits of this writing requirement have been very clearly explained by Allah (the Creator) in Surah
Baqarah 2:282. Allah narrates in verse 282 of the holy Quran as follows: ‘O you who believe, when you transact a loan
for any period, you shall write it down. An impartial scribe shall do the writing. No scribe shall refuse to perform this
service, according to God's teachings. He shall write, while the debtor dictates the terms. He shall observe God as his
Lord and never cheat. If the debtor is mentally incapable, or helpless, or cannot dictate, his guardian shall dictate
equitably. Two men shall serve as witnesses; if not two men, then a man and two women whose testimony is acceptable
to all. Thus, if one woman becomes biased, the other will remind her. It is the obligation of the witnesses to testify when
called upon to do so. Do not tire of writing the details, no matter how long, including the time of repayment. This is
equitable in the sight of God, this assures better witnessing, and eliminates any doubts you may have. Business
transactions that you execute on the spot need not be recorded, but have them witnessed. No scribe or witness shall be
harmed on account of his services. If you harm them, it would be wickedness on your part. You shall observe God, and
God will teach you. God is Omniscient’.
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Vohra, B. and Aun, W.M. 2010. The Commercial Law of Malaysia, Malaysia: Longman; Hui,
Lam Sinn. Commercial
Law
(Students’ Companion Law Series). Kuala Lumpur: International Law Book Services.
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The Quran, 2: 282.
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Ibn Qudama. Al-mughni. 4: 218.
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Niazi, Liaqat Ali Khan, 1990. Islamic Law of contract. p. 60.
International Journal of Business and Social Science Vol. 1 No. 2; November 2010
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Even though the Qur’an has not made it compulsory to have written contract documents but its mention is
sufficient evidence to indicate its necessity in a veiled manner as the essence of its spirit is self explanatory.
As has been earlier stated, oral contract is also valid in the Islamic law of contract. Hence, we can say that
Islam does not provide any specific formality to make a contract, so that, people are at a liberty to develop a
specific formality of a contract based on practice in the society and nature of the contract, such as, writing and
signature requirement and witnessing requirement. Specific format and formality for certain contracts under
certain circumstantial situations can also be established to perform in accordance with the requirement of the
prevalent law.
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